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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of: ) ) CoxCom, Inc. ) CUID No. VA0152 ) File No. CSB-A-0538 Appeal of Local Rate Order ) of the Town of Vinton, VA. ) MEMORANDUM OPINION AND ORDER Adopted: December 13, 1999 Released: December 15, 1999 By the Deputy Chief, Cable Services Bureau: 1. CoxCom, Inc. ("Cox") filed an Appeal challenging Ordinance No. 691 ("local rate order") issued by the Town of Vinton, Virginia ("Town"). The local rate order disallowed Cox's rate adjustment and required refunds. The Town filed an Opposition to Cox's Appeal. Cox filed a Reply. 2. Under the Commission's rules, rate orders issued by local franchising authorities may be appealed to the Commission. In ruling on an appeal of a local rate order, the Commission will not conduct a de novo review, but instead will sustain the franchising authority's decision as long as there is a reasonable basis for that decision. Therefore, the Commission will reverse a franchising authority's decision only if it determines that the franchising authority acted unreasonably in applying the Commission's rules in rendering its local rate order. If the Commission reverses a franchising authority's decision, it will not substitute its own decision but instead will remand the issue to the franchising authority with instructions to resolve the case consistent with the Commission's decision on appeal. 3. On November 27, 1997, Cox submitted its 1998 FCC Form 1240 to the Town in support of its rate adjustment for its Basic Service Tier ("BST") for the period March 1, 1998 to February 28, 1999. On April 7, 1998, the Town approved the local rate order, which disallowed the rate increase of $0.47 because Cox had used the median household income figure for Roanoke County, where Vinton is located, rather than the lower income figure for the Town when completing line C5 of its Form 1200 in 1994. The Town ordered refunds from May 15, 1994 to May 15, 1998. 4. In its appeal, Cox contends that the local rate order should be reversed and remanded because the Town did not have the authority to deny a 1998 rate adjustment based upon its belief that an error was contained in Cox's 1994 filing of FCC Form 1200. According to Cox, the Town effectively approved the rates justified by the 1994 FCC Form 1200 nearly four years ago by failing to take any action, and lost its jurisdiction over rates when it either approved or failed to conduct any proceedings with regard to earlier filed FCC Forms 1200, 1205, 1210 and 1240. Cox argues that the Town did not dispute the basis of the calculations supporting the 1998 Form 1240 and did not object to any other aspect of the rate filing and, therefore, had no reasonable basis upon which to disallow the rate adjustment. Cox further argues that the Town's rationale for disallowing the 1998 rate adjustment and ordering refunds for the period from May 1994 to present is mistaken because the census income data reflected in the FCC Form 1200 was provided to Cox by the Cable Services Bureau on FCC Form 1201, and properly stated census income information for the county. In its Opposition, the Town explains that Cox 1998 rate for Vinton was higher than the rates for other franchise areas in the Roanoke Valley for two reasons: the census income figure used in the original Form 1200; and Form 1240 true-up benefits for upper tier programming overcharges that were the subject of successful complaints from the other communities but not challenged by Vinton. Because the Operator had declined to resolve this disparity, the Town explained it disallowed the Operator's proposed March 1, 1998 rate increase. The Town argues that its action is consistent with the Commission policy of capping permitted rates at a lower rate in less affluent communities, and the operator's refusal to settle for any rate less than the MPR is inconsistent with the Commission's policy of encouraging cable operators to work cooperatively with the communities they serve. In its Reply Cox argues that the Town's admitted that Cox's BST rate does not exceed its maximum permitted rate ("MPR"). 5. In setting up rate regulation, the Commission determined that a benchmark approach should be the primary approach for determining initial or capped BST rates. This approach uses a simple formula for measuring the reasonableness of the cable operator's rate that is based on the Commission's analysis of the rates of systems subject to effective competition. Reasonable rates approximate the rates of similarly situated systems that are subject to effective competition. The benchmark formula as revised in the Second Order on Reconsideration measures the characteristics of cable systems that might have affected rates, including variables reflecting the costs of providing service. One of these is the median income in the franchise area, which is used as a proxy for wage rates. This is shown as the Census Income Level entered in Line C5 on FCC Form 1200, the form used to determine initial or capped rates after May 14, 1994. The instructions for Line C5 provide: To find the median household income of the franchise area you serve, you may use the information provided in 1990 Census of Population and Housing: Summary Social, Economic, and Housing Characteristics, 1990 CPH5 or 1990 U.S. Census Summary Tape File 3-C. If your franchise area is located in a municipality that is identified in these Census Bureau materials, use the figure for median household income for that municipality. If your franchise area is not located in a municipality identified in the Census Bureau materials, use the figure for the county your franchise serves. *** The FCC's Cable Services Bureau can assist you in obtaining the appropriate figure. You may fax your request to the Bureau , using Form 1201. 6. Cox received the Census Income Level figure from the Commission and used it in Line C5. This figure was for Roanoke County in which Vinton is located because, according to Cox and not disputed by the Town, the census material referenced in the instructions did not provide the company with income data for the Town. Cox's action in seeking the figure from the Commission and its use of the county figure provided by the Commission was consistent with the instructions for Line C5 of Form 1200 and was permissible. Although the Town now disagrees with the census income figure used in Cox's Form 1200 in 1994, the Commission's rules do not require changes to a properly computed initial regulated rate on Form1200 because more detailed information becomes available over time or from sources different from those specified by the Commission. The Town is concerned that subscribers in Vinton may pay higher rates than subscribers in neighboring jurisdictions, but a cable operator is entitled to charge up to the maximum permitted BST rate computed on its rate from, if the bases for the figures in the rate form are justified and the franchising authority has not discovered mathematical errors in the rate from. Furthermore, a franchise authority may not disallow a properly computed BST rate because of concern that the upper tier rate may be too high. When upper tier rates were subject to rate regulation, upper tier rate increases were to be addressed in complaints timely filed with the Commission, not through offsets or adjustments to justified BST rates. We are granting the Operator's appeal and remanding the local rate order to the Town for further consideration consistent with this Memorandum Opinion and Order. 7. Accordingly, IT IS ORDERED that .the Appeal of CoxCom, Inc. from a Rate Order of the Town of Vinton, Virginia, CSB-A-0538, IS GRANTED and Ordinance No. 691 of the Town of Vinton , Virginia IS REMANDED to the Town for further reconsideration consistent with the terms of this Memorandum Opinion and Order. 8. IT IS FURTHER ORDERED that the Town of Vinton shall not enforce matters remanded for further consideration pending further action by the Town on those matters. 9. This action is taken pursuant to authority delegated by Section 0.321 of the Commission's Rules. 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief, Cable Services Bureau